Irish solicitors will vote next week on whether to rescue a struggling insurer run by lawyers to the tune of €16m.
Irish solicitors will vote next week on whether to bail out a struggling insurer run by lawyers to the tune of €16m.
The vote over the future of the Solicitors Mutual Defence Fund (SMDF) has split the profession, with those against questioning the Law Society of Ireland’s role in the affair and warning that the fund’s losses could be far higher.
The Law Society wants to impose a levy of €200 a year on every solicitor’s practising certificate for the next 10 years in order to cover the potential costs of negligence claims brought against SMDF members.
A postal vote on the issue will close on Monday (13 June) with the outcome likely to be close. Ireland’s largest corporate firms are believed to be divided. Arthur Cox, William Fry and Mason Hayes & Curran are understood to have recommended a yes vote to lawyers, while McCann Fitzgerald and Matheson Ormsby Prentice are both believed to have suggested that lawyers vote no.
The latest set of accounts for the SMDF, to the year ending 30 November 2010, have not yet been published, but the previous year’s accounts warned that claims against SMDF-insured firms were rising at an “alarming rate” to “an unacceptable level”.
Over 90 per cent of firms insured by the SMDF employ five or fewer lawyers. A total of 22 per cent of the profession is believed to have been insured by the fund last year. The SMDF will not be providing cover in the upcoming professional indemnity period.
Vincent Crowley, a partner at niche immigration firm Collins Crowley Solicitors who led calls for the postal vote and the argument against the bailout, said unreleased reports by accountancy firm Deloitte suggested that the total value of pending claims against the SMDF were worth €308m.
Although 90 per cent of claims are reinsured, with Chartis as the lead insurer, some insurers have reserved their rights with regard to these claims. That means that the SMDF could end up being liable for a greater proportion of claims.
“There’s no guarantee that the reinsurers won’t repudiate on the grounds of non-disclosure,” said Crowley, warning that the profession could be asked for further funds in the future.
Partners of large firms criticised the Law Society’s actions over the SMDF, saying the monetary value of the levy was less the issue than the lack of certainty over the SMDF’s future.
“There are probably other ways of dealing with it,” said one managing partner.
However some said they supported the vote as the potential for fallout if the SMDF collapsed was “immense”.
The Law Society of Ireland did not return calls for comment on the issue. SMDF chairman Laurence Shields also did not return calls for comment.